Does the Granary County Subsidy Program Lead to manipulation of grain production data in China?

Manipulation of food production data could lead to catastrophic social and economic consequences. The accuracy of official agricultural statistics has long been questioned in China. This paper studies the linkage between agricultural production data manipulation and the Granary County Subsidy Program (GCSP). Since 2005, Chinese government gave subsidies to those counties with five-year average grain production between 1998 and 2002 more than 200 thousand tons to encourage these local governments to give priority to grain production. The prospective counties with grain production slightly below the threshold may have incentives to over-report their grain production. Based on the McCrary (2008)'s density test, this paper provides suggestive evidence of over-reporting grain production caused by the GCSP in 2005, 2006 and 2008, though the over-reporting rates are only 3%, 2%, and 1.7% respectively. The policy implication would be that fiscal distribution rules of a central government should avoid data manipulation incentives in local governments, particularly should cut the linkage to the data which are self-reported by the local governments.